Leveraged loans

AMC and American Airlines took advantage of surprise stock-price surges to cash out shares and raise liquidity for possible debt reduction — a massive stroke of good fortune for the companies as well as their creditors.

The struggling movie-theater chain is among once-risky debt investments reaping big gains after day traders helped fuel the sudden stock surge.

Cheap funding costs have extended a lifeline to many troubled companies, slowing the pace of U.S. bankruptcy filings, but shops, offices and hotels have been particularly vulnerable to the pandemic this month.

About $16 billion across 43 deals in both new-issue and refinancing has prompted analysts into making early revisions to raise their initial volume forecasts.

More may be on the horizon as lenders lose patience with defaulting property owners.

Distressed debt funds on average gained 11.4%, according to Hedge Fund Research Inc., compared to the riskiest corporate bonds rising 2.3%.

Energy, retail and consumer services companies led a total of 244 filings, according to data compiled by Bloomberg.

Bausch, formerly Valeant Pharmaceuticals, has paid down more than $24 billion of the $32 billion in leverage it owed five years ago from a debt-driven acquisition spree — which ended after a drug-pricing scandal.

The buyout industry has about $3 trillion of unrealized value on its books, according to Preqin. And it’s tapping that to land loans for bolt-on deals, to refinance debt or bail out struggling companies in their portfolios.

Bankruptcies reached levels not seen in a decade, distressed debt soared to almost $1 trillion and it may take years to repair the damage to airlines, restaurants and hotels. While 2020 may be over, the drama probably isn’t.